Joint home loans: To do or not to do?

JointhomeLoans

We have all heard of home loans haven’t we? The banks take into consideration the eligibility criteria before sanctioning a loan. A borrower must be at least 21 years of age and at most 60 years of age to avail a loan. However the age criteria varies from bank to bank.

Also the borrower must have a high CIBIL score, usually above 750 to be within the eligible bracket to receive a loan. Once the borrower is proved eligible, he/she is entitled to a maximum loan amount of 60 times his/her monthly net income. For example if Mr. A who is 30 years old earning a monthly income of Rs. 80,000/- applies for a loan, he will be entitled to an amount of Rs. 48,00,000/-.

What if Mr. A is looking to buy a flat worth 1.5 crore? So where does he acquire the balance from, to pay for his house? This is where joint home loans come in. He can take a joint home loan with his spouse, sibling, parent or son. The one who jointly takes a loan with him is called the co-applicant.

The banks then take the joint monthly income of the co-applicant and the borrower and club it as one, increasing the loan amount the borrower and the co-applicant are entitled too. This means that the co-applicant also has the responsibility for the repayment of the loan. This indeed will make it far easier for Mr. A to buy the flat that was always on his mind. The borrowers can claim the interest paid on the loan as a deduction under section 80c in the ratio of the interest paid. However if the co-applicant has a poor CIBIL score, the banks will not consider his/her score and the amount the borrower is entitled to,won’t increase.

Usually there is a lot of ambiguity between the definition of a co-applicant and a co-owner. A co-owner includes the owners of the concerned property to be purchased. A Co-applicant is the person who jointly takes a loan along with the borrower. Banks insist all the co-owners be co-applicants mandatorily. On the other hand, co-applicants don’t necessarily have to be co-owners.

It is always better to go in for a joint loan, if the loan required is exorbitant. One should keep in mind that a higher loan is accompanied with a greater interest over a period of time. On the other hand, if the borrower has the capacity to make a huge down payment, he shouldn’t go for a joint loan and must opt for a single home loan, thus saving on the total cumulative interest and the risk to pay the bank more.

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